Correlation Between INTER CARS and Retail Estates

Can any of the company-specific risk be diversified away by investing in both INTER CARS and Retail Estates at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining INTER CARS and Retail Estates into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between INTER CARS SA and Retail Estates NV, you can compare the effects of market volatilities on INTER CARS and Retail Estates and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in INTER CARS with a short position of Retail Estates. Check out your portfolio center. Please also check ongoing floating volatility patterns of INTER CARS and Retail Estates.

Diversification Opportunities for INTER CARS and Retail Estates

-0.39

Correlation Coefficient

INTER CARS  Retail Estates

Very good diversification

The 3 months correlation between INTER and Retail is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding INTER CARS SA and Retail Estates NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Retail Estates NV and INTER CARS is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on INTER CARS SA are associated (or correlated) with Retail Estates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Retail Estates NV has no effect on the direction of INTER CARS i.e., INTER CARS and Retail Estates go up and down completely randomly.

Pair Corralation between INTER CARS and Retail Estates

Assuming the 90 days horizon INTER CARS SA is expected to generate 1.82 times more return on investment than Retail Estates. However, INTER CARS is 1.82 times more volatile than Retail Estates NV. It trades about 0.14 of its potential returns per unit of risk. Retail Estates NV is currently generating about -0.16 per unit of risk. If you would invest  11,540  in INTER CARS SA on October 23, 2024 and sell it today you would earn a total of  1,920  from holding INTER CARS SA or generate 16.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

INTER CARS SA  vs.  Retail Estates NV

INTER CARS SA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in INTER CARS SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, INTER CARS reported solid returns over the last few months and may actually be approaching a breakup point.

Retail Estates NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Retail Estates NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with INTER CARS and Retail Estates

The main advantage of trading using opposite INTER CARS and Retail Estates positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INTER CARS position performs unexpectedly, Retail Estates can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Retail Estates will offset losses from the drop in Retail Estates' long position.

The idea behind INTER CARS SA and Retail Estates NV pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.